Judge Timothy B. Taylor, Case 37-2023-00011728-CU-CO-CTL 2023-09-01 Tentative Ruling

Judge: Timothy B. Taylor, Case: 37-2023-00011728-CU-CO-CTL, Date: 2023-09-01 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - August 31, 2023

09/01/2023 01:30:00 PM C-72 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Timothy Taylor

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Civil - Unlimited Contract - Other Motion Hearing (Civil) 37-2023-00011728-CU-CO-CTL JAY GILL TRUSTEE OF THE RJ GILL FAMILY 2021 NG DYNASTY TRUST VS MARX CAUSAL DOCUMENT/DATE FILED: Motion to Dismiss, 04/25/2023

Tentative Ruling on Continued Motion to Dismiss - Forum Non Conveniens Gill v. Marx, Case No. 2023-11728 Sept. 1, 2023, 1:30 p.m., Dept. 72 (continued from May 26) 1. Overview and Procedural Posture.

This case arises out of plaintiff's investment of $1 million in an enterprise called Quantum Automotive.

The complaint was filed in Madera County (where plaintiff lives) in November 2022. ROA 1. It alleges claims for fraud, breach of fiduciary duty, and recission. In early 2023, the parties stipulated to transfer venue to San Diego County (ROA 7), and the case was assigned to Dept. 72. ROA 4-6, 8-10.

Presently, defendants seek an order dismissing the case on forum non conveniens grounds pursuant to the following mandatory forum selection clause in the company's certificate of incorporation: 'Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine.' ROA 13, 17-24. Plaintiff filed opposition, arguing that the forum selection clause had been superseded by subsequent agreements. ROA 26-27. Defendants filed reply. ROA 28-30. On May 26, 2023, the court -- perceiving shortcomings in the parties' briefing -- continued the hearing to today. The court ordered supplemental briefing on this issue: whether enforcing the forum selection clause has the potential to contravene California's fundamental public policy protecting the right to a jury trial. ROA 36, 38. The court has reviewed the supplemental briefs. ROA 43-44.

The case is also set for a continued CMC. ROA 37.

2. Applicable Standards.

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2979912 42 CASE NUMBER: CASE TITLE: JAY GILL TRUSTEE OF THE RJ GILL FAMILY 2021 NG DYNASTY TRUST 37-2023-00011728-CU-CO-CTL A. 'In California, the procedure for enforcing a forum selection clause is a motion to stay or dismiss for forum non conveniens pursuant to Code of Civil Procedure sections 410.30 and 418.10[.]' Berg v. MTC Electronics Technologies (1998) 61 Cal.App.4th 349, 358. Forum non conveniens is an equitable doctrine, under which 'a trial court has discretion to decline to exercise its jurisdiction over a cause of action that it believes may be more appropriately and justly tried elsewhere.' Drulias v. 1st Century Bancshares, Inc. (2018) 30 Cal.App.5th 696, 703.

B. A mandatory forum selection clause – such as the one at issue here – is generally given effect unless enforcement would be unreasonable or unfair, and the party opposing enforcement of the clause ordinarily bears the burden of proving why it should not be enforced. Handoush v. Lease Finance Group, LLC (2019) 41 Cal.App.5th 729, 734. That burden, however, is reversed when the forum selection clause impacts a party's substantive rights under California law. Id. at 734-35. In that situation, the party seeking to enforce the forum selection clause bears the burden to show litigating the claims in the contractually-designated forum will not diminish in any way the substantive rights afforded under California law. Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147. '[A] defendant can meet its burden only by showing the foreign forum provides the same or greater rights than California, or the foreign forum will apply California law on the claims at issue.' Id. at 157.

3. Discussion and Ruling.

The continued motion to dismiss is denied.

A. '[T]he California Constitution affords a right to a jury trial in common law actions at law that were triable by a jury in 1850, but not in suits in equity that were not triable by a jury in 1850.' Nationwide Biweekly Administration v. Superior Court (2020) 9 Cal.5th 279, 315. Fraud is one such action that was triable at law. Mendoza v. Ruesga (2008) 169 Cal.App.4th 270, 284. While parties to a pending action may waive their right to a jury trial (Code Civ. Proc. § 631), they may not do so in a predispute agreement. Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 951, 967. Such agreements are not permitted under section 631 and are therefore unenforceable. See id. at 961, 967.

In this case, it is undisputed that the certificate of incorporation is a predispute agreement. Moreover, as noted above, the certificate's forum selection clause provides that 'the Court of Chancery in the State of Delaware shall be the sole and exclusive forum' for four types of stockholder actions. 'The Delaware Court of Chancery is court of equity.' El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp.

(Del. 1995) 669 A.2d 36, 39. There is no right to a jury trial in such courts. Park Oil, Inc. v. Getty Refining and Marketing Co. (Del. 1979) 407 A.2d 533, 535. Thus, by requiring the parties to litigate their disputes in the Court of Chancery, the forum selection clause constitutes an unenforceable predispute jury waiver. Defendants therefore bear the burden of showing that litigation in the Chancery Court will not diminish in any way plaintiff's substantive rights under California law. Handoush, supra, 41 Cal.App.5th at 739.

B. In their supplemental briefing, defendants make no attempt to meet their burden. They do not address the fact that Delaware permits predispute jury waivers. See, e.g., The Data Centers, LLC v. 1743 Holdings LLC (Del. Super. Ct., Oct. 27, 2015) 2015 WL 6662107, at *4.* Nor do defendants cite any authority demonstrating how a Delaware court would treat a predispute jury waiver in a situation comparable to this case.

Instead, defendants rely on C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1 in arguing that the 'gist' of plaintiff's fraud claim is equitable because the relief sought – i.e., the return of plaintiff's investment – depends on application of equitable doctrines. This is not the law. First, defendants misread C & K Engineering. As explained over fifteen years ago by the Second District Court of Appeal in rejecting a similar argument, the reference in C &K Engineering to the 'gist' of the action is merely a rule about how to determine 'whether a common law court before 1850 could have entertained the plaintiff's action and granted the requested relief[.]' Jogani v. Superior Court (2008) 165 Cal.App.4th 901, 908. The rule does not transform a historically legal claim, such as fraud, into Calendar No.: Event ID: TENTATIVE RULINGS

2979912 42 CASE NUMBER: CASE TITLE: JAY GILL TRUSTEE OF THE RJ GILL FAMILY 2021 NG DYNASTY TRUST 37-2023-00011728-CU-CO-CTL equitable one. Id. Second, defendants' argument ignores decades of California precedent to the contrary. '[T]he fact that equitable principles apply to a particular cause of action does not by itself compel the conclusion that the cause of action is one in equity.' Martin v. County of Los Angeles (1996) 51 Cal.App.4th 688, 696.

Thus, 'even though the case involves equitable principles if it is one where the common law courts could and would grant relief, trial by jury is preserved.' Ripling v. Superior Court (1952) 112 Cal.App.2d 399, 402.

To the extent defendants contend that Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819 supports their position, they are mistaken. In that case, the plaintiffs' causes of action were styled as claims for breach of fiduciary duty and fraud, but the claims were in substance attempts by trust beneficiaries to enforce the terms of the trust against the trustee. Id. at 831-32, 863-64. Such actions are equitable. Id. at 864. The instant action, of course, does not involve an attempt to enforce the terms of a trust. Van de Kamp is therefore distinguishable.

C. Alternatively, defendants assert that Handoush is distinguishable because the forum selection clause in that case contained an express jury waiver. This is a distinction without a difference. As noted above, jury trials are not permitted in the Delaware Chancery Court. The ruling in Handoush was based on the unenforceability of predispute jury waivers – not the precise language used. Defendants' reliance on Turlock Golf and Country Club v. Superior Court (1966) 240 Cal.App.2d 693 is misplaced as that case involved the requirements for an enforceable jury waiver under section 631. In any event, '[w]here it is doubtful whether a party has waived his or her constitutionally-protected right to a jury trial, the question should be resolved in favor of preserving that right.'** Badie v. Bank of America (1998) 67 Cal.App.4th 779, 804.

D. In sum, defendants have failed to meet their burden of showing that plaintiff's right to a jury trial on his fraud claim would not be diminished in the Chancery Court. The motion to dismiss is therefore denied. See Handoush, 41 Cal.App.5th at 741.

4. CMC.

The parties should attend the hearing prepared to assist the court in setting the case for trial and scheduling other litigation benchmarks.

_________________________________ *'Opinions from other jurisdictions can be cited without regard to their publication status.' Lebrilla v. Farmers Group, Inc. (2004) 119 Cal.App.4th 1070, 1077.

**Later this month, the Fourth District Court of Appeal, Div. 1 will hold oral arguments in EpicentRx v. Superior Court, Case No. D081670, which involves very similar issues.

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